Industry Update
Opinion Article26 May 2020

Hotel Industry Trends: The Near Future Report

Looking at the near future of the hotel industry: what factors can help predict hotel performances across destinations and hospitality market segments?

By Jochen de Peuter, Consultant at EHL Advisory Services, Lausanne Office and Pierre Verbeke, Director Hospitality Advisory Services at EHL Advisory Services

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Jochen  de PeuterJochen de Peuter
Pierre  VerbekePierre Verbeke

What might the hotel industry expect over the coming months? We do not have a crystal ball, however there is enough data available that reveal hotel trends based on economic relationships.

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Factors related to hotel performance do not predict a bright immediate future

Intercontinental travel is not expected to pick up the coming months or year, flights and airline routes are cancelled, governments are slowly opening borders sometimes coupled with quarantine measures, most economies expect a drop of GDP by double-digit numbers, and many companies, organisations and consumers become risk averse to travel or to spend money.

The hotel industry is expected to reopen between June and July

With access to many online data sources, we should be able to make decent forecasts of the near future within the hotel industry. Lately, some hotel technology companies have revealed hotel performance in several parts of the world. Recently @OTAInsight posted Videos on the hotel opening rates. It seems that globally most hotels plan to reopen 1st June, the rest foresees 1st July (below graph).

Regional trends for hotel bookings are picking up marginally

@Siteminder posted a snapshot of the bookings worldwide for 35,000 hotels, connected to more than 400 hotel booking channels: World Hotel Index . It appears that after declining steeply in April, global level has picked up marginally begin of May. So far the positive news. Global booking levels however remain low, totalising around 12% of the 2019 levels, year to year same period". Here are a few learnings by destination:

  • The near future for hotels in China and East Asia

Domestic flights are resuming and the Labour Day holidays increased the booking volumes: in Taiwan and Hong Kong booking volumes rose respectively to 53.3% and 53.09% year-over-year (2019 vs 2020) and they look to continue rising. Across South East Asia, booking momentum remains below 10% compared to 2019 year-over-year with the exception of Vietnam, which saw its year-over-year booking volume surge to 21.63% to 2019 year-over-year.

  • The near future for hotels in Asia Pacific and US

Australia and New Zealand are currently faring best with booking volumes rising to as high as about 20-22% of 2019 levels. In the rest of Asia Pacific, booking levels remain low. The US sees its national booking volume rise to above 20% of 2019 levels. There are some regional differences per state. New York City reverted to 6% of the volume of mid-March while Tampa in Florida peaked at 42% of the volume of mid-March.

  • The near future for hotels in Europe

On average for Europe, the percentage remains below 10% of bookings compared to the same period in 2019, with only a marginal increase compared to 2 weeks ago. Italy's booking level is permanently below the bench market. Remarkably, Sweden a country with no lockdown, is at only 15% of its 2019 booking level.

  • The near future for hotels in Africa, Latin and South America

The drop of reservations has lagged by a few weeks compared to the other regions in the world; in addition, no stable upward trend over the last month is visible.

Opportunities by hotel market segments

  • Leisure hospitality market
Opportunities might arise in the leisure market very soon. The summer holiday periods might become a short moment of positivism for some type of hotels. Currently, many hoteliers of coastal areas report a strong increase of reservations from domestic travellers for July-August. It seems that people are eager to escape after weeks of lockdown. Many countries (often northern) even lack availability to serve the domestic market. For the European market, local governments will soon give clarity on the travel possibilities. The expectations are that travel within Europe by car or plane becomes possible for several countries.

Campings, glampings, holiday rentals in apartments, chalets and individual housing sees a huge surge in interest. Agriturismo and similar booking sites report important last minute pickup. With all booking sites offering full flex for free, this creates opportunities.

  • Local and exotic destinations
Local travel will be the tendency worldwide because of flight limitations. Some airline companies plan already flights to the nearest tourist island destinations within the EU. Some EU countries have already expressed their openness to welcome foreign EU-guests. City hotels might benefit of citytrip visits during summer period as well. Exotic tourist destination depending on global markets suffer currently. Below graph illustrates the booking level of little populated exotic destinations, actual compared to 2019 reservation levels.
  • The Corporate Travel and MICE segments
The business and conference hotels have different expectations. The corporate and mice segments are non-existing currently. Companies and organisations have become more risk averse in regards to travel and get more familiar with online meetings and webinars. They might become used to it forever.
Companies will not be able to afford a second lockdown and will do their utmost to protect the business and will therefore adapt their travel policy in order for individuals not to become stranded, in order for the business to continue operating. Some very large companies have already announced that meetings with 20 people or more will be postponed to 2021 at the earliest, if not forbidden altogether.

It reminds us of the financial crisis in 2008. Companies started to exclude luxury five star hotels to accommodate staff or host events. The impact of covid19 may become everlasting this time as well.

Conclusion: a modest upward trend in the near future and permanent disruptions

From the graphs above, we may conclude that the amount of hotel reservations for the immediate future is negligible, not viable to survive for many. It is clear that the impact of the Covid-19 crisis on the hotel industry is going to be permanently disruptive. For those who still had a sprinkle of hope: the year 2020 is expected to be a lost year for the entire hotel industry. With the current data online available, the low reservation levels, many hotels lose more money by opening compared to remaining closed, in particular larger luxury or conference hotels. It is clear that those who will not change now, will put their business at risk. Innovation and reinvention of a new business model is the only path to move successfully forward in times of bad forecasts.

Reinventing the business can also mean to become even better at what they do, but adapt the businesses will have to do.

At the same time, the upward trend of most destinations reveal that we are heading into a moderate positive direction.

Numbers are one thing, they can be analysed once they are known, forecasts can be made but what will we base those forecasts on?

The governments will need to clarify the travel rules and regulations, airlines will need to adapt, airports will need to adapt, customers will need to adapt and change. And there lies the biggest unknown: what will customers require or expect in post Coronavirus times?

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Jochen de Peuter

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Pierre Verbeke

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